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South African investors will get very little of their money back from property syndicates marketed by the international Louis Group, which has its headquarters in Cape Town. This has emerged in a liquidators’ report released this month into about 120 separate Louis Group companies in the Isle of Man which sucked in more than R1bn (about £60m) from individual investors.
More than 700 people, mostly from South Africa and the UK, put in average amounts of £10 000 (about R180 000) to £30 000 (roughly R500 000) into properties in South Africa and elsewhere, says the PricewaterhouseCoopers report. The highest amount invested was £5m (R90m).
Significantly it has emerged that the wealthy family behind the Louis Group allegedly never put any money into the syndicates. This is in contrast to promises made at the marketing stage.
“Promotional materials and investor testimony show us that the sales pitch was compelling,” said the report. Investors “were promised high returns from property backed investment with support from the Louis Family when needed” in one scheme.
Investors in another were “promised even more, fixed returns on their investments, debt as opposed to shares and a money back guarantee” from a company at the time called Louis Group International (Holdings) Limited. This company was “represented to many as the main global holding vehicle of the Louis Family’s assets”.
“From the comments we have had from investors to date, a majority of investors have said that when they decided to invest, they had taken comfort from the thought that the Louis Family was co-invested with them,” said joint liquidators Michael Simpson and Gordon Wilson. In addition, they thought their money was safe because it was backed by property.
“That this seemingly secure and ethically well founded operation should somehow be insolvent was unthinkable and there was widespread disbelief among the investor base when we were appointed. How could this have gone wrong?” commented the liquidators.
They highlighted that investors believed in international group CEO Alan Louis, who was “vociferously protesting against our involvement, representing to investors that he alone was the man to be trusted to get them their money back and repeatedly painting himself as the victim in all this”.
The liquidators have realised about £42m from the sale of about 40 different properties. Unfortunately, none of this goes to investors.
This is because the companies took out loans against the properties. As a result, “the vast majority of this money has been paid to banks as they had first charge security over the properties sold”.
Most of the remaining £10m available for distribution and proceeds from the remaining properties left to sell – worth an estimated £3m – will also go to financing banks, said the liquidators.
Although investors will be left empty-handed they can perhaps take some comfort from the knowledge that this matter has been reported to the Financial Supervision Commission (Isle of Man). The liquidators believed that “highly improper” conduct ultimately brought the property investments down.
Among the list of discoveries in a complex investigation involving about 5 000 files, tens of thousands of bank transactions and more than 1m emails, the liquidators alleged they have uncovered evidence of:
- Widespread conflicts of interest, breaches of procedures and other serious failings in corporate governance;
- Hidden fees and commissions;
- New investor capital being used to service interest and to pay old investors their capital back, often in completely different companies;
- Substantial payments to Alan Louis and/or his companies, “running into the millions of pounds, accounted for as debts due by him but neither documented or repaid and the existence of which he now disputes;
- Highly questionable transactions involving the use of funds belonging to property structures;
- Prolonged apparent deception linked to questions about what happened to investor money; and
- Highly questionable retrospective documentation, missing documentation, unreliable accounting records and evidence of false accounting.
The liquidators hope to return about 13p (aboutR2) to 16p for every £1 (R18)invested, by setting up a proposed new entity in connection with the pooling of assets in a new vehicle. However, for some investors “there is no hope of any return”.
The liquidators said that investors across all Louis Group structures in the Isle of Man have “suffered significant losses and inevitably there will be calls for those responsible to be held accountable”. They say it is for the FSC to take action where it considers it necessary.
Alan Louis refused to answer a full set of questions put to him by BizNews, including what his response was to investors who have ploughed hard-earned savings into his property syndicates and are concerned about their money. He did not accept an invitation to be interviewed on BizNews radio.
Louis gave this statement to BizNews: “
The first report by the Investigators was found to be wholly incorrect by the internationally renowned auditing firm, Mazars, and the many allegations in the first report shown to be wrong by this their subsequent report.
This further report is again wrong.
All that is now required is a response with evidence, a proper audit trail of legal documents and alleged loans so that the other side can be heard.
I have and will always co-operate in all these proceedings.